Use the following information about a hypothetical government security

dealer named M.P. Jorgan. Market yields are in parenthesis, and amounts are

in millions.

Assets Liabilities and Equity

Cash $10 Overnight repos $170

1-month T-bills (7.05%) $75 Subordinated debt

3-month T-bills (7.25%) $75 7-year fixed rate (8.55%) $150

2-year T-notes (7.50%) $50

8-year T-notes (8.96%) $100

5-year munis (floating rate)

(8.20% reset every 6 months) $25 Equity $15

Total assets $335 Total liabilities & equity $335

a) What is the reprising gap if the planning period is 30 days? 3 months? 2

years?

b) What is the impact over the next 30 days on net interest income if interest

rates increase 50 basis points? Decrease 75 basis points?

c) The following one-year runoffs are expected: $10 million for two-year Tnotes

and $20 million for eight-year T-notes. What is the one-year

reprising gap?

d) If runoffs are considered, what is the effect on net interest income at

year-end if interest rates increase 50 basis points? Decrease 75 basis

points?

e) If you use only duration to immunize your portfolio, what three factors

affect changes in the net worth of a financial institution when interest

rates change?